2 Answers
2

The difference is that because is a statement of causality, while in that is used to describe a relationship or a perception.

The car's steering was off because an accident had bent one of the tie rods.

The car's steering was off in that I could feel a slight wobble even when driving on level, flat pavement.

In the second example, you wouldn't use because because the symptom is not the cause. In the first example you wouldn't use in that because the bent tie rod is a direct cause, not a perception (unless it involved speculation, which here it does not).

I think of in that as a shorter form of in the sense that (or to the degree that) something appears to be a certain way.

It would be pretty odd to say "That car is nice, in that it is blue" unless you were speaking to someone who knew that you had a (probably extreme) predeliction for the colour blue.

I don't quite agree with @Robusto's implication that because can't substitute for in that. It often can, in that/because there's often no real difference between whether the statement preceding it is something literally caused by the 'subsidiary statement' following, or "metaphorically" comes to be true from the perspective of the subsidiary.

To my mind, the primary difference is that in that is a somewhat "formal" construction, primarily used in writing rather than speech.

A secondary difference concerns the fact that, as Robusto says, it can usually be replaced by in the sense that. If it seems reasonable in context to replace by only or specificallyin the sense that, you almost certainly couldn't use because instead.